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Spectral risk measures with an application to futures clearinghouse variation margin requirements
Author(s)
Date Issued
2006-10-31
Date Available
2009-06-15T15:26:06Z
Abstract
This paper applies an AR(1)-GARCH (1, 1) process to detail the conditional
distributions of the return distributions for the S&P500, FT100, DAX, Hang Seng,
and Nikkei225 futures contracts. It then uses the conditional distribution for these
contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to more familiar VaR and Expected Shortfall (ES) measures of risk, and also compares the precision and discusses the relative usefulness of each of these risk measures in setting variation margins that incorporate time-varying market conditions. The goodness of fit of the model is confirmed by a variety of backtests.
distributions of the return distributions for the S&P500, FT100, DAX, Hang Seng,
and Nikkei225 futures contracts. It then uses the conditional distribution for these
contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to more familiar VaR and Expected Shortfall (ES) measures of risk, and also compares the precision and discusses the relative usefulness of each of these risk measures in setting variation margins that incorporate time-varying market conditions. The goodness of fit of the model is confirmed by a variety of backtests.
Sponsorship
University College Dublin. School of Business
Type of Material
Working Paper
Publisher
University College Dublin. School of Business. Centre for Financial Markets
University College Dublin. School of Business
Series
Centre for Financial Markets working paper series
WP-07-02
UCD Business Schools Working Paper Series
WP09/03
Copyright (Published Version)
2006, Centre for Financial Markets
Classification
G15
Subject – LCSH
Clearinghouses (Banking)
Extreme value theory
Risk--Econometric models
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
File(s)
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WP-07-02.pdf
Size
276.22 KB
Format
Adobe PDF
Checksum (MD5)
2a15c1a9d1195b3631928013a5a65b41
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